Pay Transparency: What It Is and Laws by State

As employees and job candidates across the country expect greater clarity from organizations, certain states aim to require it for compensation. Ideally, pay transparency — or openly sharing salary data — may reduce pay inequity, wage discrimination and other potentially harmful practices.

On the other hand, businesses that have successfully grown and operate without pay transparency could be daunted by managing a new requirement. After all, no two states share identical laws. Between jurisdictions, an employer may need to disclose:

• entry-level pay
• benefits
• salary ranges
• individual salaries

Whether you face a new rule’s effective date or want to learn what pay transparency could do for your workforce, we’ll help you understand the concept and the differences between state requirements.

What is pay transparency?

Pay transparency is the practice of openly sharing pay information with employees and potentially the public. While it could be limited to salaries, pay transparency also could apply to:

• bonuses
• stock options
• commission structures
• compensation increases associated with promotions
• wage ranges for specific roles and departments

A relatively new concept, no law outright prohibits a company from sharing this information. But in 2019, Colorado became the first state to require pay transparency. (The law itself took effect in 2021.)

What are pay transparency laws?

Pay transparency laws refer to any active legislation that requires businesses to disclose compensation info. Some rules may only mandate internal transparency, while others require sharing this data to the public — primarily through job postings.

Simply the presence of pay transparency laws in a certain state doesn’t mean they cover every company. For example, New York’s Fostering Access, Rights and Equity (FARE) grant only applies to private employers with more than three workers. Hawaii’s Act 203, on the other hand, doesn’t apply to organizations in the Aloha State with less than 50 employees.

Additionally, pay transparency laws can require businesses to make their workforce aware of potential promotions and advancement opportunities. Known as “promotion transparency,” legislation like the second part of Colorado’s Equal Pay for Equal Work Act requires employers to notify every employee of advancement opportunities within the organization, regardless of department.

If pay transparency gains more momentum, we could see variations on these requirements or new concepts related to hiring and change management.

What states mandate pay transparency?

These 10 states currently require (or will require) pay transparency:

• California
• Colorado
• Connecticut
• Hawaii
• Illinois
• Maryland
• Nevada
• New York
• Rhode Island
• Washington

Pay transparency isn’t limited to how much employees get paid, either. Certain laws give candidates and current workers insight into what they could earn with the organization, too. For instance, a potential applicant might keep their options open if they clearly can see the salary ceiling for an employer.

While unique in individual guidance, these laws share common purposes to:

• enhance visibility
• reduce wage disparities
• boost financial well-being
• empower individuals to make more informed employment decisions

Whether pay transparency is ideal for your organization is beside the point. If where your company operates requires it, your compliance depends on understanding the concept and adhering to applicable state rules.

States with current or imminent pay transparency laws

Even if pay transparency laws don’t immediately affect your operations, it’s not a bad idea to proactively grasp them. Eventually, your state(s) or even a federal requirement could mandate the practice.

Keep the following states in mind as you adjust your compliance strategy to account for pay transparency.

California

The California Equal Pay Act went into effect in early 2023. While employers with one employee need to disclose salary ranges only upon their worker’s request, those with at least 15 employees — even with just one working in California — must:

• provide salary ranges for all job postings
• give employees a specific role’s salary range upon request
• not ask a job candidate about their pay history

Colorado

Since Jan. 1, 2021, Colorado’s pay transparency law requires all employers with at least one worker in the state to announce promotion opportunities to every employee the same day the position opens. With every job posting, employers also must disclose:

• hourly wages or salaries
• benefit information
• any other applicable compensation

Connecticut

Connecticut’s Public Act 21-30 went into effect on Oct. 1, 2021. Similar to Colorado’s law, Connecticut employers must disclose pay data during the hiring process at the candidate’s request or prior to making a job offer.

Similarly, the state requires companies to disclose salary info to current employees upon request or when they change positions.

Hawaii

Beginning early this year, Hawaii requires businesses with 50 or more employees to provide salary ranges or hourly wage rates with every job posting.

Notably, this data must accurately reflect what an employer reasonably expects to pay for a role. For example, if a company posts a salary range of $50,000 to $200,000, the higher figure can’t be informed by an unrealistic commission expectation.

Hawaii’s pay transparency law doesn’t cover promotions, internal transfers or public employees whose salary is set by a collective bargaining agreement.

Illinois

Effective Jan. 1, 2025, Illinois House Bill 3129 will amend the state’s Equal Pay Act of 2003. The amendment requires employers with at least 15 workers to provide a wage scale for all job postings.

Additionally, covered companies must also provide a general description of the benefits in their total compensation statement, including:

• bonuses
• stock options
• other financial incentives

Maryland

Since late 2020, the Maryland Equal Pay for Equal Work initiative requires every employer to provide applicants with a position’s wage scale upon request.

Nevada

Nevada’s pay transparency law, Senate Bill 293, went into effect on Oct. 1, 2021. It requires all employers to provide candidates with salary info for any role the applicant interviewed for.

Plus, any current employees seeking a promotion or internal transfer are entitled to a new position’s salary data if they:

• applied
• interviewed
• or received an offer for the role

New York

New York requires employers in the state with four or more workers to disclose salary ranges for all positions. The same guidance applies to jobs that can be performed in New York or outside the state that report to a New York-based supervisor, office or worksite.

Rhode Island

Since 2023, Rhode Island’s Pay Equity Act requires companies with at least one employee to disclose salary ranges for:

• current positions (by request)
• applicants before discussing an offer
• employees at the time of hire or prior to moving to a new position

Washington

The Revised Code of Washington 49.58.110 went into effect on Jan. 1, 2023. It requires employers with 15 or more employees and openings that could be filled by state residents to:

• include salary ranges for all job postings
• disclose pay for internal job transfers and promotions at an employee’s request

States with proposed pay transparency laws

In addition to the 10 states with current or pending pay transparency laws, the following have proposed similar legislation:

• Alaska
• Kentucky
• Maine
• Massachusetts
• Michigan
• Missouri
• Montana
• New Jersey
• Oregon
• South Dakota
• Vermont
• Virginia
• Washington, D.C.*
• West Virginia

* Washington, D.C.’s page transparency law, D.C. Act 25-367, will go into effect June 30 pending a 30-day congressional review.

Employers who operate in these jurisdictions should pay close attention to proposed pay transparency laws and similar regulations. Even if not passed, the legislation reflects an ongoing effort to introduce the concept — possibly where you operate.

5 benefits of implementing pay transparency

Beyond compliance in states that require pay transparency, companies may experience several benefits from introducing the practice. Here are just five.

1. Promote trust

Employees tend to trust organizations that value equity and fairness. Explaining how compensation is determined and distributed is one way of encouraging this. It could help your people feel more secure and comfortable in their current role if they have evidence of their competitive salary.

2. Support competitive pay structures

Speaking of competitive pay, transparent compensation can prove to employees that they earn — or even exceed — the industry standard. This candor not only helps retention, but expands your team with top talent.

3. Drive employee productivity and engagement

When employees know their pay sincerely reflects their roles and contributions, it’s easier to cultivate their commitment. After all, if you knew your pay was at the top of others with your career, would you feel compelled to work elsewhere?

4. Encourage pay equity

Pay transparency can help diffuse bias and close the gap between gender, racial and other forms of wage disparities. Shining a light on these issues doesn’t mean your company is fundamentally flawed, but it does help identify areas where you could be more equitable.

5. Increased applicant interest

Salary ranges in job postings could help your business attract truly interested and motivated candidates. This practice diffuses the mystery and can help hiring managers get ahead of:

• potentially awkward conversations
• subverted expectations
• lost applicants due to disagreements over pay

3 challenges of implementing pay transparency

Pay transparency has benefits, true, but introducing it may pose several obstacles. Consider the following four hurdles before and during implementation.

1. Constant flux to align with the market

If you work in an industry with erratic pay, it’ll be difficult to keep your compensation competitive. While you should regularly evaluate all your business’s practices, constantly updating and changing pay quickly can drain resources without:

• a benchmark
• a solid core strategy
• an understanding of market trends

2. Employee discomfort with pay disclosure

It’s useless to avoid the elephant in the room: If employees suddenly know each other’s pay, they may question why they get paid differently. With harsh enough disparities, pay transparency could create tension among your people.

On one hand, it could trigger certain employees to feel undervalued or underappreciated. Conversely, some workers may feel the need to hide or defend their wage. Addressing both groups could be difficult without a categorical — and likely costly — adjustment to your compensation strategy.

3. It doesn’t fully close the wage gap

Pay transparency can help address inequity at work, but it’s not the sole fix. Cultivating equity requires addressing other issues, like:

• favoritism
• bias in hiring and promotions
• unequal access to development opportunities
• a toxic work culture

Your company may benefit from pay transparency, but no one concept truly can correct systemic issues. That takes time, dedication and a willingness to change as legal requirements and employee expectations demand it.

8 tips to effectively implement pay transparency

Introducing pay transparency can be daunting — and necessary — if your state requires it. Even if it’s not mandated, the concept could help your organization foster a more equitable culture. Ultimately, that responsibility lies with the needs of your employees and executive leadership.

Regardless of why your business introduces pay transparency, keep these eight tips in mind as you roll it out.

1. Research current pay transparency laws by work location

Before you implement any program, verify which — if any — current pay transparency laws affect your operations. Compliance obligations will inform situations in which you must disclose compensation info.

2. Conduct market research on pay ranges for each position

Even if you have a decent idea about a role’s salary range, research it. Look into similar businesses or industries to ensure you maintain competitive ranges for the roles in your organization. This helps you understand where your company stands — and if it needs to pivot.

3. Audit any existing pay transparency practices against your research

Based on your findings, evaluate your current (or lack of) practices. In doing so, you’ll spot where you may need to adjust:

• salaries
• benefits
• bonus structures
• other forms of compensation

4. Develop a core strategy for salaries based on roles

Once you understand what your employees’ wages should be, create a strategy to help guide you. Define every piece of compensation for each role and account for those that don’t exist yet.

Economic uncertainty — such as from inflation — may compel you to change, but this strategy provides a solid foundation from which to move forward.

5. Include HR and management on the pay transparency team

Your initiative shouldn’t be built by a single department. HR pros and leaders from across the company could provide valuable input to smooth the transition to pay transparency. They’ll also help effectively implement and construct the new pay policies.

And train managers on pay transparency requirements. After all, creating a safe and healthy environment often falls on supervisors. They should make it clear that employees who discuss their pay shouldn’t fear retaliation.

6. Plan the rollout of new pay structures with your team

With policies drafted, collaborate with the team you formed to better steer implementation. Everyone involved with the process should have a clear understanding of:

• goals
• the timeline
• their responsibilities

7. Communicate the pay transparency program to employees

After you’ve finalized your policies, it’s time to present them to employees. Be sure to express these rules clearly and make it easy for your people to access them. However you convey this info, make sure it reflects:

• a commitment to pay transparency
• why it exists
• the changes employees should expect

Sticking the landing with open and honest communication helps build trust with your workforce.

8. Track and adjust pay practices as needed

Pay transparency is more than a box to check. Implementing it effectively requires maintenance and willingness to change.

Continue to monitor and adjust your policies based on shifts in:

• the legal landscape
• job market
• your organization

Flexibility helps ensure your pay transparency policies remain responsive, effective and compliant.

Can payroll software support pay transparency?

Yes, the right payroll software supports pay transparency by automating and simplifying the management and understanding of compensation. Paycom’s payroll tools, for example, help:

• create transparent pay structures
• compare internal wages
• generate reports for pay transparency compliance
• protect sensitive information

And pay transparency isn’t just about knowing others’ pay; with Beti^®, Paycom’s payroll experience, it’s about each employee understanding their own pay. Each payroll cycle, Beti automatically identifies errors, then guides employees to correct them before submission.

In effect, Beti empowers employees to do their own payroll. They enjoy more insight into what goes into — and comes out of — their pay and can confirm it’s right every time. This frees HR to focus on more strategic initiatives.

Explore our resources to learn more about compliance-related topics and other areas of HR.